Multiple Choice
4. What is one reason why a company should prepare an operating budget?
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13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
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A forecast that projects a company’s sales is a(n):
A
Statement of cash flows
B
Sales budget
C
Cash flow from investing activities
D
Balance sheet
Verified step by step guidance1
Understand the concept of a sales budget: A sales budget is a financial plan that estimates the expected sales revenue for a specific period. It is typically based on market analysis, historical data, and company goals.
Differentiate between the options provided: A statement of cash flows focuses on cash inflows and outflows, a balance sheet provides a snapshot of assets, liabilities, and equity, and cash flow from investing activities is a section of the cash flow statement related to investments.
Recognize that a sales forecast is directly related to estimating sales revenue, which aligns with the purpose of a sales budget.
Eliminate options that do not pertain to sales projections: The statement of cash flows, cash flow from investing activities, and balance sheet do not specifically project sales.
Conclude that the correct answer is 'Sales budget,' as it is the financial tool used to forecast a company’s sales.
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